County officials continue clash over investment strategy

Published
12:00 am CDT, Wednesday, May 14, 2014

EDWARDSVILLE — The back and forth between Madison County Auditor Rick Faccin and Madison County Treasurer Kurt Prenzler continued Wednesday when Faccin’s office announced its intention to call for an investment oversight committee for the Treasurer’s investments.

Faccin proposed the oversight committee at the latest meeting of the Madison County Finance and Government Operations Committee. The committee voted to table the proposal for one month.

Faccin and Prenzler have been at odds over the investment revenue generated by the Treasurer’s office during Prenzler’s three years in office.

A release sent from the Auditor’s office Wednesday said, “Prenzler is responsible for investing in excess of $130 million in county funds. Faccin reported last month that revenues from county investments have sharply declined during the past three years of the Prenzler Administration. In addition to a $1 million loss of county funds in 2011 incurred by Prenzler through a pre-mature sale of county bonds, investment income has dropped from $3,671,861 in 2009, before Prenzler was elected treasurer, to $573,817 in 2012, and $273,368 in 2013. The rate of return on investments has declined from 3.89 percent in 2009 to 0.21 percent in 2013.”

Faccin’s objections over Prenzler’s handling of county investments have become fairly regular. Faccin has routinely cited low returns on Prenzler’s investments while Prenzler has previously cited very low current interest rates and the need for the county to emphasize the importance of safety, liquidity and yield.

“I agree with Kurt, that security is a concern, but not this kind of security. This county today is almost debt free and in great fiscal position,” Faccin told the committee according to official audio minutes of the meeting. “There is other investment he could diversify and get out into with roughly a $130 million portfolio that he chooses not to do. He wants to be a money manager and go into short-term bonds that pay nothing.”

The treasurer told the Telegraph Wednesday evening of what he believed was the motive behind the auditor’s request for an investment oversight committee.

“The county auditor is upset, because I blew the whistle on the ‘rigged’ tax sales that resulted in his friend Fred Bathon going to prison,” Prenzler said.

Wednesday’s release cited Faccin’s comments regarding falling revenue made at a meeting of the Madison County Board’s Finance Committee.

“… The lack of investment earnings by Mr. Prenzler has resulted in a loss of revenue needed to operate county government. When this occurs, the lost revenue must be made up in other areas, including property taxes. As Madison County Auditor, I am bringing this issue to the Finance Committee’s attention,” the release said.

“This is political. The fact is that there were a lot of shenanigans going on in the treasurer’s office. Illegal tax sales. An exclusive relationship with one Little Rock, Arkansas bond salesman involving a half billion dollars. And it was the same cast of characters,” Prenzler said to the committee according to audio minutes of the meeting. “Bathon’s investment officer was also his campaign treasurer and his auctioneer for the illegal tax sales. A good CPA/auditor would see a pattern here.

“Again, what did our county auditor do? Nothing.”

Last month the Telegraph asked for opinions of the treasurers of Champaign, Lake and Sangamon counties regarding Madison County’s investment strategies. All three cited a poor investment environment and the need for safe investing.

“Treasurers are not investors — what they are is cash managers,” Champaign County Treasurer Dan Welch, who has worked for the Champaign County Treasurer’s office for 41 years and has been treasurer for 16, told the Telegraph.

He also criticized Faccin for playing out his disagreements with Prenzler publicly.

“What I’m always a little surprised at is what doesn’t happen in Champaign County is that my auditor doesn’t go to a county finance committee meeting and talk about me like I’m not there,” Welch said. “I mean if my auditor had a problem with me he’d call me up and we’d talk about it. I find it a little sad that your county officials down there have to talk to each other through the press or some other way rather than talk to each other. Aren’t we all trying to do the right thing for the taxpayers?”

In Wednesday’s release, Faccin outlined his proposal for an oversight committee composed of Madison County Board members to investigate the treasurer’s investment performance including:

• Why Prenzler purchased a $5 million U.S. Treasury Bond on Sept. 11, 2011 that earned only $2,000 in interest when it matured on May 15, 2012, an investment return of six one-hundredth of one percent (0.06 percent) on a $5 million investment?

• Why Prenzler has an excessive amount of short-term investments earning extremely low interest yields? In Prenzler’s March Investment report, Prenzler had in excess of $63 million in cash and money market investments and additional $71 million in other investments under two year maturity.

• Why Mr. Prenzler only earned 0.21 percent on $130 million in investments in 2013.

Faccin said his concerns are not with the safety of investments, rather the performance.

“Even in today’s low interest rate environment, earning only two-tenths of one percent on a $130 million investment portfolio is extremely poor,” Faccin said. “The fact of the matter is public dollars have been lost and the poor investment performance by the county treasurer is bad government.”

Prenzler, when sought for comment about the auditor’s release, said he is doing what the vast majority of county auditors in Illinois do with the short-term, lower yielding investments: Emphasizing safety and state law. He referred to his comments made to the Finance committee earlier Wednesday.

“In summary, all county treasurers invest public funds the same way: Short-term. Short-term interest rates are at historic lows. Would all county treasurers like to earn more interest? Of course. But the law requires that they invest safely, which means short-term,” Prenzler told the committee members.

Prenzler also suggested the committee consider returning some of the county’s excess finances to taxpayers rather than investing it in long-term bonds.

“The County’s portfolio has increased from $105 million to about $135 million today,” Prenzler told the Telegraph. “If the County has excess money, it should be returned to the taxpayers. The County should not build a war chest.”

The creation of an investment oversight committee will be revisited at next month’s meeting of the Madison County Finance and Government Operations Committee.

“I invest the money safely, as required by Illinois law, and just like Illinois county treasurers. Unfortunately, short-term interest rates are low.”